The Election Rally Just Aced Its First Test By Sean Michael Cummings, analyst, True Wealth
The 2024 election looks like it will be quite the slog... As of Friday's polling data from ABC News' 538, 55% of Americans hold an unfavorable opinion of President Joe Biden. Meanwhile, 53% of Americans feel the same about former President Donald Trump. In other words, the majority of voters prefer neither candidate. But that's not how American democracy works... The election will proceed. And come November, one of these two men will almost certainly be the winner. When it comes time to cast ballots, voters will likely choose their "least bad" option. It's a bleak political backdrop. And you might expect this to drain investor sentiment, too. But in reality, the 2024 bull market is running strong. The market rally passed a critical test of resilience in January... and it points to a positive year ahead for stocks.
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When it comes to U.S. presidential politics, don't overlook Ohio. After all, "As Ohio goes, so goes the nation." Historically, whoever wins in Ohio has typically won the presidential race. We have a similar saying in finance, too: "As January goes, so goes the year." January tends to act as a "bellwether" month. A good return in January correlates to a good year for stocks, and vice versa. Stocks rose about 2% last month. This performance is already a positive sign for the market... But according to history, we should be especially bullish after a strong January in an election year. I've discussed how elections support the stock market before in DailyWealth. Here's what I said on the subject last month... It's worth noting that elections are reliably bullish. Stocks were positive in 20 of the past 24 election years... resulting in a strong win rate of 83%. Elections and a strong performance in January are each bullish for stocks. But I wanted to see what happens when you have both in the same year... To test this, I found the one-month returns for every positive January in an election year going back to 1928. Then, I measured what the market returned over the next year. The results were overwhelmingly bullish. Take a look... 
The U.S. has had 24 election years since 1928. And 11 of those had a positive January return... In every case, January gains led to higher stock prices a year later. And more often than not, the market outperformed, too... Stocks return an average of about 6% a year with a typical buy-and-hold strategy. But the average return soars to 11% when you buy after a strong January in an election year. And 73% of the time, stocks return double-digit gains. In short, last month's performance spells a big year for stocks. Don't let this year's political scene get you too shaken up. History shows stocks are likely to surge after the dust settles – regardless of the outcome. Good investing, Sean Michael Cummings Further Reading "Do yourself a favor and ignore the daily noise," Dr. David Eifrig writes. So much information is at our disposal today. It can be hard to know what's crucial and what's irrelevant. But as long-term investors, we can afford to ignore short-term events... Read more here. Emotions run wild during volatile market periods – especially in election years. And it doesn't help if the TV is constantly blaring bad news in the background. That's why you should consider a classic investing approach: the "coffee-can portfolio"... Learn more here. |
Market Notes HIGHS AND LOWS NEW HIGHS OF NOTE LAST WEEK Visa (V)... payment-processing giant
JPMorgan Chase (JPM)... financial giant
American Express (AXP)... financial giant
Citigroup (C)... financial giant
S&P Global (SPGI)... financial analytics
Meta Platforms (META)... social media giant
Amazon (AMZN)... online-retail king
Netflix (NFLX)... video streaming
Nvidia (NVDA)... chip giant
Palo Alto Networks (PANW)... cybersecurity
Dell Technologies (DELL)... laptops and PCs
Danaher (DHR)... science, health, and tech
Eli Lilly (LLY)... pharmaceuticals
GSK (GSK)... pharmaceuticals
Stryker (SYK)... medical devices
Costco Wholesale (COST)... membership-only stores
Colgate-Palmolive (CL)... household goods
Cintas (CTAS)... uniforms
O'Reilly Automotive (ORLY)... auto parts
General Electric (GE)... manufacturing
CSX (CSX)... railroads NEW LOWS OF NOTE LAST WEEK C.H. Robinson Worldwide (CHRW)... shipping technology
Peloton Interactive (PTON)... e-fitness fad
DuPont de Nemours (DD)... chemicals
Mosaic (MOS)... fertilizer
MAG Silver (MAG)... silver
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